Helping kids buy their first car the right way
February 08, 2012 | Alliant Credit Union
Remember the first time you bought a car? Prices and sales tactics have changed a lot since the 1960s and 1970s, but one thing remains the same: The first-time buyer usually is an easy mark for a salesperson. Why? Most young buyers are enthusiastic and untutored, which leads to big profits in the auto business. Here's a quick plan to rein in your kid's enthusiasm and raise his or her negotiating skills.
Teach kids to budget before they shop. How much can they spend in total dollars and/or per month? The figure should include allowances for insurance, gas and maintenance.
Teach them to do their homework before they shop: What cars in their price range are mechanically reliable? A search through Consumer Reports® auto issues will help. What would insurance cost for a car like that? A quick call to your insurance agent will answer that.
Teach them never to buy on their first visit to a dealership, even if they love the car. People who buy on the spot always pay more. A smart young person will find two cars at two different locations and play those two sellers off against each other. Prices tumble when real negotiating begins.
Teach them how to recognize the best price. When they've found the car they like, ask your credit union to tell you what that specific car's "loan value" is, and make the loan value figure your targeted buying price. Negotiate up slowly from that figure.
Teach them the power of smart financing. If your kids are paying cash, fine. But if they are financing, then shop financing. Ask the seller to give you a completely filled out copy of the finance contract and bring that contract to your credit union. Compare each item on the seller's contract to the credit union contract. Nine times out of 10, your credit union will be cheaper.
A first-time buying experience should be an exciting experience. Follow these guidelines, and it will be a smart one, too.
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